The Treuhandanstalt, 1990–94

01March 1990 – December 1994

An agency for a whole economy, and three presidents in nine months

It began as a GDR body and ended as a federal one. In between it inherited 8,000 Kombinate, the GDR’s combined industrial groups, and state-owned enterprises, with about 32,000 works and sites. Its first president lasted five weeks; its second was murdered.

The Treuhandanstalt, 1990–94: its presidents

GohlkeRohwedderBreuelEvents

A man in a dark suit speaks at a lectern in a wood-panelled chamber; five officials sit at a bench behind him. — Hans Modrow, chairman of the GDR Ministerrat, gives his government statement to the Volkskammer, 17 November 1989. His government founded the trust agency on 1 March 1990.Bundesarchiv, Bild 183-1989-1117-018 / Rainer Mittelstädt / CC BY-SA 3.0 de

1 March 1990

Modrow’s government founds a trust agency

On 1 March 1990 the GDR’s Ministerrat, under Hans Modrow, resolved to found an agency to hold the people’s property in trust. Selling it was not yet the plan.

Four coins on a white ground: a one-mark and a one-pfennig coin of the GDR beside a one-Deutsche-Mark coin and a pfennig. — One mark of the GDR, one Deutsche Mark and their pfennigs, photographed for ADN in April 1990, ten weeks before the currency union of 1 July converted wages and salaries one for one.Bundesarchiv, Bild 183-1990-0424-015 / Peer Grimm / CC BY-SA 3.0 de

17 Jun 1990 · 1 Jul 1990

Privatise “as fast and as far as possible”

On 17 June 1990 the freely elected Volkskammer passed the Treuhandgesetz: privatise “as fast and as far as possible”. Two weeks later the currency union converted wages and salaries one for one into Deutsche Marks.

A heavy-set man in glasses and a dark suit speaks into a cluster of microphones. — Detlev Karsten Rohwedder before journalists, 21 August 1990, eight days before he became president of the Treuhandanstalt.Bundesarchiv, Bild 183-1990-0821-025 / Thomas Lehmann / CC BY-SA 3.0 de

15 Jul 1990 – 3 Oct 1990

Two presidents in six weeks

Rainer Maria Gohlke took office on 15 July 1990 and resigned on 20 August 1990. Detlev Karsten Rohwedder replaced him on 29 August 1990. From 3 October 1990 the agency answered to the federal finance ministry.

No licence-clear photograph of Gohlke was found.

1 April 1991

Rohwedder is murdered

His watchword had been: “privatise quickly, restructure decisively, close down carefully”. On 1 April 1991 an RAF sniper shot him dead at his home in Düsseldorf. His wife, Hergard, was badly injured. The killing has never been solved.

A woman with curly hair in a checked jacket gestures with both hands as she speaks at a microphone. — Birgit Breuel opens an international conference on investment in eastern Germany, Berlin, 27 May 1991, six weeks after she took over the presidency.Bundesarchiv, Bild B 145-F088082-0031 / Joachim F. Thurn / CC BY-SA 3.0 de

13 Apr 1991 – 31 Dec 1994

Birgit Breuel, to the end

Twelve days later Birgit Breuel took over, on 13 April 1991. She ran the agency until it closed.

A low, glass-walled modern parliament building with a flat overhanging roof and flagpoles, seen across a park path in winter. — The Bundestag’s plenary building in Bonn, in use from 1992 to 1999, where the parliament set up its committee of inquiry into the Treuhandanstalt on 30 September 1993.Qualle, 2005. Wikimedia Commons. CC BY-SA 3.0.

30 Sep 1993 – 31 Aug 1994

The Bundestag investigates

The Bundestag set up a committee of inquiry on 30 September 1993. Its 846-page report of 31 August 1994 could not agree. The coalition majority and the opposition filed opposing verdicts.

31 Dec 1994 · 1 Jan 1995

The agency closes

The Treuhandanstalt closed on 31 December 1994. The next day DM 205 billion of its debt passed to the Erblastentilgungsfonds, the federal fund set up to pay off what unification left owing.

02The count of 31 May 1994

Of 12,335 enterprises, 6,377 were sold and 3,399 wound up

The agency broke the Kombinate into saleable pieces, which multiplied the count. That is why it is credited with privatising anything from six thousand enterprises to fourteen thousand: the finance minister gave the inquiry 6,054 whole enterprises privatised by June 1994, and 14,079 once 7,570 enterprise parts and 455 mining rights were added. The bars below count whole enterprises, in the agency’s own monthly statistics.

The Treuhandanstalt’s enterprises, 31 May 1994

PrivatisedReturnedPublicWound upStill heldTaken out

31 May 1994

13,661 enterprises in the portfolio

By 31 May 1994 the breaking-up of the Kombinate had produced a portfolio of 13,661 enterprises. Every bar in this panel is drawn on the same scale.

Taken out of the count

1,326 were not enterprises to dispose of

462 were mining rights, 408 were reclassified as the agency’s own assets, and 299 had been merged or split again. That leaves a gross holding of 12,335.

51.7% of the holding

6,377 privatised

6,089 were sold outright and 288 to a majority buyer. About four in five of these sales were made by the regional branches, not by headquarters in Berlin.

12.9% of the holding

1,586 returned to former owners

1,586 enterprises went back to the owners, or their heirs, from whom they had been taken under the GDR.

2.6% of the holding

324 to public hands

264 went to towns and districts and 60 were assigned by possession orders. It was the only outcome that kept an enterprise in public ownership.

27.6% of the holding

3,399 wound up

More than one in four was put into liquidation rather than sold: 3,292 liquidations were still in progress and 107 complete. This is what the argument has been about ever since.

5.3% of the holding

649 still undecided

Seven months before the agency closed, 649 enterprises were still in its hands. Everything else, 11,686 of 12,335, had been decided.

041990 – spring 1994

The people inside: from about four million to fewer than two hundred thousand

The agency’s own count of the people working in the enterprises it still held fell year by year. That is not a count of jobs lost. When an enterprise was sold, it left the holding with its staff.

People employed in enterprises the agency still held

Agency’s own countEstimate given in evidence

1990

Before it had sold anything

About 4.08 million people worked in what became Treuhand enterprises at the start of 1990. By July it was about 3.5 million: the GDR’s eastern markets had collapsed and its customers had switched to western goods.

31 Dec 1990

3,162,867 still inside

At the end of 1990, 3,162,867 people worked in enterprises the agency still held, by its own data management.

31 Dec 1991

1,837,131

A year later, 1,837,131. The big sales of 1991 took whole workforces out of the holding.

31 Dec 1992

759,526

By the end of 1992, 759,526.

30 Jun 1993

379,791

By mid-1993, 379,791: about one in eight of the number at the end of 1990.

Spring 1994

179,000 left

In spring 1994 a witness told the inquiry that 179,000 people still worked in enterprises the agency owned.

14 April 1994

What became of the 3.5 million

On 14 April 1994 a witness told the inquiry where the 3.5 million of mid-1990 were: 7% still in a Treuhand enterprise, 43% in a privatised one, and 50% gone through job cuts. About half of those went straight onto the unemployment register.

Another witness, earlier that spring, put the number working in Treuhand and former Treuhand enterprises together at 1.2 million to 1.3 million. The two accounts do not agree, and the inquiry did not reconcile them. Against them stood 1,486,900 jobs that buyers had promised by the end of 1993.

In 1994 East Germany’s unemployment rate averaged 14.8% of the civilian labour force.

05Who bought

Measured by jobs, 85% went to West German buyers

The economist Hans-Werner Sinn gave the inquiry the split, counted by the jobs attached to what was sold rather than by the number of enterprises: 85% to West Germans, 9% to foreign buyers, 6% to East Germans.

A grey-haired man in a dark jacket speaks into a microphone on a book-fair stage beside an interviewer; copies of a book stand on a high table. — The economist Hans-Werner Sinn, who gave the committee the buyers’ shares, at the Frankfurt Book Fair in 2015.JCS, 2015. Wikimedia Commons. CC BY 3.0.

Who bought, by the jobs attached to what was sold

Other splits circulate, by share of productive assets or of large privatisations only; they measure different things. Source: Sinn’s evidence to the committee, Bundestag Drucksache 12/8404.

Management buy-outs: two counts, on one scale

The agency counted 2,591 buy-outs by managers and staff among 13,643 enterprises and parts privatised. A survey for the economics ministry found ordinary takeovers recorded as buy-outs and put the true figure about 8 per cent lower: about 1,850 to Feb 1993. 66% of all buy-outs were at firms with one to fifty employees.

06Rostock · 1991–94

900 jobs promised, 15 people left

When the Bagger-, Bugsier- und Bergungsreederei in Rostock was sold in 1991, the contract bound the buyer to keep 900 of its roughly 1,400 employees for at least three years. By February 1994 its works council chairman put the workforce at 15. All 900 were still counted in the agency’s published job pledges: its president confirmed to the inquiry that they included every pledge ever agreed, whether or not the firm was still trading.

One Rostock company, on one scale of people

Every bar is drawn to the same scale. The 15 make a sliver.

Harbour cranes line a long quay across grey water; a flag flies from the bow of a boat in the foreground. — Rostock’s overseas port, July 1990. The dredging, towing and salvage company sold here in 1991 is not in the picture; no licensed photograph of it was found.Bundesarchiv, Bild 183-1990-0716-017 / Jürgen Sindermann / CC BY-SA 3.0 de

07The reckoning

It closed DM 256.4 billion in the red

Sales were never going to cover the cost. By early 1994 the agency’s contracts had agreed DM 49 bn in sale proceeds, much of it not yet due. Buyers had promised DM 186.6 bn of investment, and had invested DM 14.2 bn of it by the end of 1993. Its 1994 accounts closed with a deficit of DM 256.4 bn, about €131 billion at the fixed conversion rate.

The money, in billions of Deutsche Marks, all on one scale

Breuel’s figures are what she told the committee, rounded as she gave them. They are spending, not the deficit, which also nets off what came in. The deficit and the debt taken over are two different accountings and are shown separately. Sources: Drucksache 12/8404, Drucksache 13/1834, Deutsche Bundesbank, March 1997.

The inquiry could not agree

Both verdicts are in the same 846-page report of 31 August 1994.

The majority · CDU/CSU and FDP

the Treuhandanstalt discharged its duties under the Treuhandgesetz as the circumstances allowed; the government had supervised properly and no minister had leaned on a decision.

The minority · SPD, and separately PDS/Linke Liste

the agency was given power over thousands of firms and millions of livelihoods while being released from liability for its mistakes; saveable firms were shut too fast and sold too cheaply; of four million jobs in Treuhand enterprises about 1.2 million were left.

Seven months before it closed, 11,686 of its 12,335 enterprises had been sold, handed back, transferred or wound up.

The building it worked from now carries the name of the president it lost.

One agency took over East Germany’s state industry and, in under five years, sold, returned or wound up almost all of it. It closed DM 256.4 billion in the red.